Gold price volatility, tax revenue, and employment: can Burkina Faso's adaptation strategy avoid the natural resource curse?

Abstract

AbstractSince 2007, Burkina Faso's mining sector has grown quickly, with gold replacing cotton as the country's biggest export. The decline in gold prices since 2012, however, has hit the Burkina Faso economy hard. Using a static computable general equilibrium model, we assess whether – in a context of gold-price decline and volatility – an increase in the tax burden on the mining sector, as implemented by the government of Burkina Faso, is the appropriate way to avoid the natural resource curse. The results show that a tax policy based solely on increasing taxes on the gold sector brings only limited economic benefits, notably in terms of employment, and fails to significantly mitigate the effects of gold-price volatility.